Last year the most popular tool for financing the construction steel inserts.

Mortgages - this is really one of the few securities with collateral in the form of real estate under construction, but gives its owner the rights to property. The only right of the owner of the mortgage is entitled to receive the sum of the principal obligation, which is equated to the cost of construction unit of real estate and reflected in the mortgage. Mortgages have become one of the most convenient types of securities it to developers because of the absence of state control over its issuance and circulation. In an environment where trust bonds triggered massive defaults developers, issuers, and as a consequence have been recognized tool for the legalization of proceeds from crime, mortgages have become the most optimal way for developers.

As the ideologist and developer of embedded, I, Natalia Dotsenko-Belous - Senior Lawyer Law Firm "Vasil Kisil and Partners, has to report the following. In view of recent legislative changes, namely the entry into force of the Law № 2367 from 23.07.2010 year, further use of bonds for the purpose of raising funds to build an illegal activity, leading to a substantial increase in investor risk - the potential homebuyers.

Use the mortgage creates the following risks for investors:

• the risk of misuse of funds paid by the buyer to a financial intermediary for a mortgage;

• The risk of return to the buyer a mortgage amount of money equal to the cost of construction per unit area, as reflected in the mortgage (Article 20 of the Act of Ukraine "On ipoetki"). While the buyer`s acquisition of a mortgage made at a price equated to market value of the future apartment to get her property.

• The risk that the transaction to acquire a mortgage at a price above its par value (the sum of the principal obligation) transaction which is contrary to public policy (Article 228 of the Civil Code of Ukraine) in the absence of it make economic sense. So the investor acquires a security that gives the opportunity to receive the amount of principal obligation, at a price that substantially exceeds the amount obtained in future income. Transactions that are contrary to public policy are void by virtue of the provisions of Article 228 of the Civil Code of Ukraine. At a paltry transaction not subject to the presumption of legality (Article 204 of the Civil Code of Ukraine), and they do not require the recognition of its invalidity in the courts, because from the moment they are signed, they do not create legal consequences for implementing them (Article 236 of the Civil Code of Ukraine).

In this regard, we draw attention to stakeholders that the companies continue to use the mortgages for the sale of residential property under construction, are misleading potential buyers that have the characteristics of a criminal offense under Art. 190 "Fraud" of the Criminal Code of Ukraine.

At the same time in accordance with Art. 230 MAS, in case one of the parties to the transaction intentionally introduced the other side of being deceived about the circumstances that are significant, the transaction is recognized by the court to be invalid. When you use the mortgage can be traced very clearly the fact of an intentional introduction of the developer mislead investors - is invited to a mortgage as a way of continuing to provide property rights en apartments, while the mortgage itself does not provide parvo person interested in the apartment.

Party, which has used deceit, shall reimburse the other party for losses in the double size and moral damage caused in connection with the transaction.

Therefore, we expect that law enforcement agencies will take the necessary steps to prevent actions that could lead to damage to persons enforces developers to acquire housing through the use of mortgages.

About the illegality of the sale of real estate under construction using bonds evidenced by the following provisions of the legislation:

• absence of express legislative provisions possibility of using bonds to finance construction of housing that is required by the provisions of Art. 4 of the Law of Ukraine "On investment activity", as amended by law number 2367.

• availability of circuits using embedded initially deliberately planned actions aimed at reducing the object of taxation from the developer by removing the profit from the sale of bonds (for which the hidden sales rights to the apartment) at a venture fund (which is used in the scheme). Using the venture fund as a kind of joint investment institution is justified by the fact that his income from the sale of securities not included in gross income in accordance with p.4.2.8. Law of Ukraine "On taxation of company profits. Soft-selling real estate through mortgages is also to reduce the subject to VAT at the fact that operations on the placement and treatment of mortgage funds are not subject to VAT in accordance with p.3.2.1 Law of Ukraine "On Value Added Tax." We believe that such a chain of action for selling mortgages is subject to a separate study of law enforcement agencies to determine the presence in them of a criminal offense under Article 212 of the Criminal Code of Ukraine.

In the future, for bona fide sub-contractors we will provide recommendations on mechanisms for financing the construction, which are legal and safe for most investors, as a whole and for developers.Natalia Dotsenko-Belous - Senior Lawyer Law Firm "Vasil Kisil and Partnerswww.zagorodna.com